Insurance may be defined as a contract between an insurer, known as an insurance company, and an insured, also known as a policy holder, in which compensation is paid by the insurer to the insured for some specific losses in exchange of a certain premium amount periodically paid by the insured in past. Whenever the insured suffers some loss for which he/she has insured or holds policy, the insured may file an insurance claim to demand compensation for the loss.
Sometimes, the insured may claim for a compensation for which the insured is not entitled. For example, the insured may deliberately plan a loss, such as theft, and car accident covered by the policy in order to receive compensation for the loss. Such situations are referred to as an insurance claim fraud. Further, in some situations, the insurance company may want to go for subrogation. In subrogation, the insurance company may recover expenses for a claim paid out by the insurance company when another party should have been responsible for paying at least a portion of that claim. For example, “Person A” is having car insurance from an “Insurance company B” and car of the “Person A” met with an accident because of “Person C”. In such cases, the “insurance company B” will pay some amount to the “Person A” as per the car insurance, following which, the “Insurance company B” may sue “Person C” for his negligence, so as to recover some or whole of the amount paid to the “Person A”. Hereinafter, the claims which have potential for subrogation may be referred to as subrogation potential claims. The insurance claims fraud and the subrogation potential claims may occur across different lines of business (LOBs).